Insurance Australia Group
has received the green light from New Zealand’s competition regulator for its takeover bid for
Wesfarmers
’ insurance underwriting business – a move that will make IAG NZ’s biggest insurer.

In a statement on Wednesday, IAG said the New Zealand’s commerce ­commissioner approved the ­company’s purchase of the
Lumley Insurance
business, just a week after it delayed the decision for the second time this year.

IAG chief executive
Mike Wilkins
said the approval was a significant step towards the company completing the purchase of Wesfarmers’ insurance underwriting business.

The decision came after IAG lobbed a $1.85 billion takeover bid for ­Wesfarmers’ underwriting arm late last year. In December, IAG said it had agreed to buy Lumleys, the insurance underwriting business of Wesfarmers in New Zealand, a deal that chief executive Mike Wilkins aims to conclude by June 30.

Credit Suisse analyst
Andrew Adams
said that IAG’s takeover remained subject to approval by the Reserve Bank of New Zealand, and in Australia approvals are still pending from the competition regulator and the federal Treasurer.

The deal will yield $140 million in pre-tax synergies based on a ­2013 financial year insurance profit of $109 million from Wesfarmers.

“We note that Wesfarmers has now reported its 1H14 earnings, with a 13 per cent increase in NEP [net earned ­premium] and insurance profit for 1H14 alone of $97 million," Mr Adams wrote in a note to investors.

“This is supportive of our view that over half of the ‘synergies’ will be achieved before IAG even gets control of the business," he said.